Democracy and income inequality: revisiting the long- and short-term relationship

Abstract

This paper studies the relationship between democracy and income inequality in long- and short/medium-run. Using appropriate econometric techniques on both, averaged and panel data for the period 1962-2006, we find no evidence that democracy is associated with tighter income distribution. Our results are robust to different specification techniques, to exclusion of developed as well as the transition countries. We speculate that the different (and opposing) transmission mechanisms, as well as the nature and the definition of the democracy variables (both Polity IV and Freedom House) influence our results. Improvement of conceptualization and measurement of democracy could shed further light onto the democracy-inequality nexus.